The Income Tax Appellate Tribunal (ITAT), Kolkata bench has held that no addition of interest on the restructuring of working capital cash credit loan.
The appellant, M/s. Prity Tubes Pvt. Ltd. is in the business of manufacturing and trading M.S. pipes etc. During assessment proceedings, the Assessing Officer sought explanations and documents in respect of the long-term advance of Rs.45,02,46,720/-. The AO without being satisfied with the explanation confirmed the addition in this respect of the claim of interest of Rs.4,05,22,204/- by observing that the assessee did not furnish any reason as to why the sundry debtors were converted into long-term advances. The aggrieved appellant filed an appeal before the CIT(A) which in turn confirmed the addition.
Before the ITAT the counsel for the appellant submitted that the list of debtors totaling Rs.45,02,46,720/- was placed and stated that as on 01.04.2013 the opening balance of trade debtors was Rs.43,15,00,742/- and that of debit balance in sundry creditors of Rs.1,87,50,114/-, totaling to Rs.45,02,50,856/-. It was further submitted that out of this amount Rs.45,02,46,720/- was transferred to long-term advance.
The counsel for the appellant further submitted that no new loans and advances were given during the year by the appellant for which the long-term borrowings have been utilized as alleged by the AO, it was only an exercise of restructuring the borrowings which compelled the appellant to report its trade receivables into long term loans and advances since the working capital cash credit loan was restructured into a working capital term loan for which all the necessary disclosures were made in the audited financial statements by the appellant and also by the auditors in their audit report.
Mr. Rajpal Yadav, Vice President, and Mr. Girish Agrawal, Accountant Member has held that “we are inclined to accept the submissions of the Counsel and direct the AO to delete the addition made in this respect of Rs.4,05,22,204/-.”
Mr. P. K. Agarwal and Mr. Sudipta Guha appeared on behalf of the appellant and respondent respectively.
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